Weekly Feed Market Commentary

Published 28 January 15

Feed Grains

May-15 UK feed wheat futures fell to a 6 week low as the contract closed at £127.05/t on Tuesday (27 Jan), down £3.45/t on last week (20 Jan). This movement echoed Chicago wheat futures (May-15) which closed at $192.15/t, down $5.69/t and the lowest level since the start of November. May-15 Chicago maize futures, which have been mainly bearish since the New Year, closed at $150.10/t yesterday (27 Jan), a drop of $3.54/t on the week before (20 Jan). These price drops follow a lack of bullish news and may also, in part, reflect the recent strength of the dollar.

The International Grains Council (IGC) released its January report last week (22 Jan) and doesn’t seem that concerned about the impact of Russian export restrictions on the world market due to sufficient supplies elsewhere. US wheat export sales came in above expectation last week despite the strength in the dollar. In addition, the IGC are forecasting a drop in 2015/16 global wheat production and stocks – but there remains a long way to go.

Although the strength of the pound against the euro is bearish for UK prices, it is also bullish for values in the Eurozone so may not result in lower domestic prices. The important issue is that sterling is weak against the US dollar, helping non-EU exports compete.

In Canada, the 6th largest producer of barley and 2nd largest producer of rapeseed, Agriculture and Agri-food Canada released its first forecast of 2015/16 planted area on 23 Jan. The report suggested small area increases year-on-year for all major grains and oilseeds, with the largest gains forecast for barley and rapeseed.

Protein Meal

UK rapemeal (34%, Ex-mill Erith, December delivery) was £190.00/t on 23 Jan, following a drop of £7.00/t on the week before (16 Jan).  While Paris May-15 rapeseed futures had fallen €2.50/t over the week to 27 January, in pound terms the price had fallen by £7.71/t due to currency movements. May-15 Chicago soyabean meal futures were $298.28/t on 27 Jan, supported by strong US export sales, up $7.17/t compared to 20 Jan.

Bearish news for soyabeans also came out of the IGC’s latest report. The global 2014/15 soyabean production estimate was increased by 4Mt to 312Mt, with consumption increases failing to keep pace.

Expectations of a record Brazilian soyabean harvest and news of Chinese import cancellations have unsettled the market. The USDA announced US net export sales of soyabeans for the week ending 15 Jan were far below expectations (according to a Reuter’s poll), at 14.1Kt, down from 1.1Mt the previous week. The strength of the dollar seems unlikely to ease pressure on US export prices.

As news of dryer than ideal conditions during key stages of Brazilian soyabean crop development emerges, markets are likely to react to weather reports over the coming weeks. Dry weather in Brazil appears to be affecting more than just crops, as news arrived that the Tiete-Parana waterway, used to transport grains and other bulk goods, will not reopen in time for the soyabean harvest. Rains through January were insufficient, failing to raise the draft enough for barges to pass. This is likely to put more pressure on Brazil’s roads, which creates more potential for logistical bottlenecks.